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Pre-Nuptial Agreements - Just In Case

"Until death do us part", we repeat to the scowling priest hovering over us, holding the King James Bible, while we try to enjoy our wedding.

All marriages end, and many do end by death, but the fact is that many do not.

But even if your marriage ends in the death of one of the two spouses, a pre-nuptial agreement or, as they are sometimes known, marriage agreements, are great innovations because they allow spouses to pre-determine the law between themselves, or between the survivor and the representative of the deceased: the in-laws!

Many - far too many - brides and grooms hitch the knot leaving the dissolution of their marriage to the whim of a judge, one often with a silver spoon sticking out of the edge of his or her mouth. Others (Britney Spears comes to mind), throw themselves into wedlock without any knowledge of the family law of the jurisdiction of the marriage.

There is always the remote chance that the law of your jurisdiction just perfectly suits your fancy in terms of resolving any dispute you might have with your spouse, should you ever separate, in terms of support, child custody or guardianship and matrimonial property. But what are the chances?!

The bad news, and it is a grave concern, is that even though a contract may be entered into by well-advised and thinking man and prospective wife, the Courts still allow themselves to overturn a pre-nuptial agreement if one of several events has, in the judge's opinion, occurred:

There are many variations on these themes and for a few dollars, I can line up a hundred contract law professors to split both into thousands of permutations but at the end of the day, these are the two standard grounds upon which a marriage contract can, in whole or in part, be set aside.

But family law, though content to borrow from contract, since a pre-nuptial agreement is a contract, still has its own little set of rules; it's own special way to set aside a marriage agreement.

If so much time has passed since the pre-nuptial that circumstances as between the spouses has substantially altered their situations, especially if one has become dependant on the other, the contract may have lost legal binding effect by the efflux of time. This is especially true if children have been born or if a spouse has taken ill and more so, the greater amount of time between the pre-nuptial and the ultimate date of separation.

In 2004, the Supreme Court of Canada crippled freedom of contract in family law when it came out with the Hartshorne, an astonishing decision which ruled that henceforth, marriage (pre-nuptial) agreements could be assessed against a judicial barameter of ... fairness - whatever that is!

In that case, Hartshorne, the pre-nuptial survioved the assessment of fair but the invitation to judges to assess against fairness augurs poorly. Of some solace are these words of the majority of the Court, at ¶65:

"By signing the Agreement, the (husband and wife) entered their marriage with certain expectations on which they were reasonably entitled to rely. If the respondent truly believed that the Agreement was unacceptable at that time, she should not have signed it. In this case, the intention of the parties, as expressed in the Agreement, was to leave with each party that which he or she had before the marriage.... The Agreement should be left intact."

In a 2009 post-nuptial agreement case (separation agreement), the Supreme Court of Canada again encouraged to Canadian courts to intervene when it comes to contracts between husband and wife:

"This Court has frequently recognized that negotiations following the disintegration of a spousal relationship take place in a uniquely difficult context. The reality of this singularly emotional negotiating environment means that special care must be taken to ensure that, to the extent possible, the assets of the former relationship are distributed through negotiations that are free from informational and psychological exploitation."1

No lawyer can guarantees to his client that a pre-nuptial will not ever be set aside by a court. It cannot be certified.

The closest we can ever get is, well, close and even at that, certain precautions have to be taken.

Rule #1: Self-Help Sucks!

Unless your assets are less than the $9.95 self-help kit, stay away from self-help or self-counsel marriage agreement do-it-yourself kits. "Do It Yourself Pre-Nup" forms are a recipe for disaster.

First of all, they come with little or no explanation before they jump a contract term on you. Secondly, they do not have the flexibility a good family law lawyer can provide. Thirdly, every jurisdiction is different on critical issues of form. Some require witnesses, others do not. With self-help kits, you usually get what you pay for.

Rule #2: Identify the Agreement

Many people, and even lawyers, who draft marriage agreements do not properly identify the document. Usually, a person later reading the document (such as the judge) will be able to take from the content that it was intended as a prenuptial agreement. However, no chances should be taken in this regard and the document should be named a marriage agreement or a prenuptial agreement.

If the parties are not living together at the time of the agreement but expect to cohabit, possibly subsequent to the date of marriage, this should be stated. The most important element is that the purpose of the contract is clearly stated:

"The parties are entering into this Agreement to determine ownership, management, and division of all property either or both of them own or may acquire during the time they live together, if the parties’ relationship ends, and if one of them predeceases the other while they are still living together."

Rule #3: Expose Yourself

Signatories to a marriage agreement should take the time to summarily describe themselves by reference to their age, occupation, employer and income. This is essential because it prevents a signatory from later claiming that essential information had been withheld from them.

Rule #4: What Do You Own & Owe?

The purpose of many prenuptial agreement is to establish a separate property regime, usually to contract-out of the community property regime that is likely in place in the family law of the spouses' jurisdiction. In any case but especially in that case, it is important for each party to clearly identify, in writing, the separate property that each owns, or their respective debts. In this way, if the marriage has to be later disentangled, the preliminary list will serve as a starting point.

Rule #5: What Do You Want To Exclude?

Often a prenuptial or marriage agreement is requested by the much wealthier spouse. In any case but especially in this case, it is important to state specifically that specified assets belong to and will remain the property of so-and-so.

Rule #6: Constructive Trust-Oxide

One of the greatest enemies to a prenuptial agreement is the constructive trust, when a judge later decides that because of the contributions of one spouse to the assets of another, a share in the asset accrued to the contributing spouse and - presto! - she owns half the condo in the Caymans! It is very difficult to completely vaccinate the marriage against this type of judicial interference by the clause such as the following is essential:

"Each party gives up forever any claim for spousal support against the other and neither party will claim spousal support, whether contractual, compensatory, or non-compensatory, or other form of compensation from the other based on actual or perceived economic prejudice suffered by reason of the relationship.

"Except as otherwise provided in this Agreement, each party gives up all claims at law, in equity, or by statute against the other relating to support or division of property if their relationship ends, including, without restricting the generality of the foregoing, all claims under family law or estate statutes, federal or provincial, with respect to support, property, succession rights, and any other matter arising from their relationship."

Rule #7: The Kitchen Sink

In order to promote peace in the marriage and remove a potential feeding ground for a constructive trust, I have found it helpful to address the issue of household expenses and duties. Here is a sample clause:

"John and Susan will share in the monthly household and family expenses in proportions from time to time adjusted directly between themselves and maintain a single joint bank account for this purpose. Also, they will share household duties including, but not limited to, cleaning, laundry, errands, gardening, shopping, cooking, and entertaining. These household duties do not constitute contributions to the maintenance and operation of the family residence entitling John and Susan to claim compensation or an interest in property not otherwise provided for in this Agreement."

Rule #8: The Other Kitchen Sink

To be safe, all good pre-nuptials end with a number of wrap-up clauses, just in case the previous111-pages of legalese was not enough. For example:

"By this Agreement, John and Susan also seek to pre-determine support obligations should their relationship end, and avoid acrimony and litigation in that unlikely event.

"John and Susan are both aware that the law provides for judicial intervention in some circumstances if this Agreement is found to be unfair now or in the future and because of that, both confirm that each of them relies on this Agreement to be enforced according to its terms, that either of them may choose not to pursue economic opportunities because of their relationship but each party recognizes that certain sacrifices will be made within, and because of, the relationship, and the consequences of those choices will not be used to avoid the terms of this Agreement.

"Further, each of John and Susan acknowledge that each of them is prepared to abide by the terms of this Agreement because each recognizes that the importance to each of them of being able to rely on the Agreement far outweighs the risk that it may operate unfairly at some future date, and the impossibility of returning the parties to the positions they occupied before they entered this Agreement would make any variation, however fair viewed solely in the changed circumstances, unfair on the whole because all dealings with their property during the course of their relationship will have been based on the binding nature of this Agreement"

Rule #9: The Icing

Any prenuptial or marriage agreement must contain the following self-explanatory clause, or something similar:

"Both John and Susan recognize the importance of obtaining independent legal advice before signing this document and that each have been given ample opportunity to do so and that the failure of either or both of John or Susan shall not be used as a grounds to later apply to a court to set aside this agreement in whole or in part."

Conclusions:

A rock-solid pre-nuptial agreement does not exist and is not possible in Canada until and unless our Supreme Court in Ottawa gives us a clear judgment that they will hold prospective spouses to their pre-nuptial bargain. Every decade a case gets to the court and family law lawyers hold their breath hoping for that glorious day ... only to be disappointed once again. But while we wait for that day, there is a lot that can be done to give brides and grooms some peace of mind.

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Unless otherwise noted, this article was written by Lloyd Duhaime, Barrister, Solicitor, Attorney and Lawyer (and Notary Public!). It is not intended to be legal advice and you would be foolhardy to rely on it in respect to any specific situation you or an acquaintance may be facing. In addition, the law changes rapidly and sometimes with little notice so from time to time, an article may not be up to date. Therefore, this is merely legal information designed to educate the reader. If you have a real situation, this information will serve as a good springboard to get legal advice from a lawyer.